The current proxy season may feel a little like déjà vu to corporate boards; several key issues from 2006 continue to weigh heavily on their minds this year. According to Institutional Shareholder Services (ISS), which is tracking almost 450 governance-related shareholder resolutions this season, majority voting in director elections and proxy access, which would allow shareholders meeting specific requirements to nominate corporate directors, remain in the limelight.

The majority voting movement arose in response to the SEC's shareholder access proposal in 2003. Majority voting empowers shareholders to better influence the outcome of director elections. Previously, company-sponsored director nominees could receive less than a majority of votes cast and still be elected if they were unopposed, as is typically the case, explains David Mittelman, of counsel with Reed Smith LLP in San Francisco.

According to ISS, shareholder activists have focused on gaining influence over corporate boards since 2005; the most frequently filed proposals last season and the year before were those requesting that boards provide that director nominees in uncontested elections be elected by "the affirmative vote of the majority of votes cast at an annual meeting of shareholders."

Majority election proposals had received more than 50 percent support by August 2006, nearly triple the proportion in 2005, report Rosanna Landis Weaver, manager with Taft-Hartley Research, and Thaddeus C. Kopinski, staff writer, in an ISS study.

It appears that majority voting will be the most common type of shareholder proposal this year, with more than 100 proposals already, according to Mittelman, who formerly served as legal branch chief of the SEC's division of corporation finance. He also served on that division's shareholder task force.

Some experts think that the SEC gave a significant boost to shareholder proxy access in January, when the agency declined to back Hewlett-Packard Co.'s attempt to block a shareholder resolution. In September 2006, a U.S. appeals court in New York City had failed to support the position of corporations that wanted to disallow shareholder proposals regarding director elections, turning to the SEC for clarification. Corporations wanted the SEC to adopt a rule that would make it tough for shareholders to amend corporate bylaws to facilitate putting shareholder-backed nominees on ballots. But the SEC declined to weigh in on the HP situation and said it would not address the broader issue of shareholder access any time soon.

A number of large companies, including AT&T, Humana and Bristol-Myers Squibb, recently instituted or announced plans to adopt majority voting, reports ISS. Will the HP case lead to more corporations following suit? "Many companies and key states have already adopted a majority voting standard," says Mittelman. "If the SEC does not act this year, companies may face many more shareholder access proposals next year."

"The SEC has put both boards and management on notice that they have to be more responsive to shareholder issues," says Raymond P. H. Fishe, professor and distinguished chair in finance at the Robins School of Business, University of Richmond, in Virginia. "I think that many boards are stunned right now, but they will find a way to better communicate with shareholders to help avoid such ballot proposals."